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The federal government has for years tried to curb global warming pollution by asking corporate polluters to voluntarily cut emissions. The evidence is in -- voluntary emissions cuts are not sufficient. Too few companies take part in these initiatives; even power companies -- the leading participants -- mostly consent only to business-as-usual actions that make no real impact on rising emissions trends. Only binding limits on global warming pollution will create the market structure needed to push competitive businesses beyond the cosmetic and into taking meaningful steps to reduce global warming pollution.

A History of Failure

The federal government has relied on voluntary measures to address global warming since the creation of the first President Bush's National Energy Strategy in 1989. Yet this approach has clearly failed to reduce emissions of carbon dioxide, the main cause of global warming.

• Between 1990 and 2003, U.S. carbon dioxide emissions increased by 17 percent.
• During this same period, carbon dioxide emissions from electric power production increased by 26 percent, twice as fast as emissions from the rest of the economy.

The longer we continue making high-carbon investments, the more costly and disruptive it will be to cut emissions. We must begin to change private investment decisions today.

Fiddling While the World Burns

We have three basic tools for reducing emissions of carbon dioxide and other global warming pollutants.

• We can produce and use energy more efficiently.
• We can dramatically increase our reliance on renewable energy resources for electricity and transportation.
• We can pursue methods to capture and permanently store carbon dioxide from the fossil energy sources we continue to use.

But voluntary programs and tax incentives are insufficient to get these technologies deployed at a sufficient scale and speed to avoid a climate catastrophe. Only a mandatory limit on carbon dioxide emissions can create the right market conditions for these new investments.

Been There, Done That

Voluntary programs aimed at reducing global warming pollution have been in place since the early 1990s. Periodically, the White House has renamed these programs and presented them as new initiatives, but they remain consistently ineffective.

• National Energy Strategy. President George H. Bush announced the National Energy Strategy in 1989, and first released it in 1991 after extensive analysis and public debate. The elements of this plan are strikingly similar to the Bush-Cheney National Energy Plan of 2001, relying primarily on research and development for new technologies and subsidies for more production. The National Energy Strategy had no mandatory requirements for carbon dioxide emission reductions and projected an increase in U.S. carbon dioxide emissions of 25 percent from 1990 to 2015 -- an acknowledgement that voluntary approaches would not significantly reduce emissions.
• Climate Change Action Plan. President Bill Clinton first announced the Climate Change Action Plan in October 1993. The CCAP combined 46 separate programs into one coordinated plan with the goal of returning U.S. emissions to 1990 levels by 2000. Most of these programs were voluntary public-private partnerships, technical assistance and research and development efforts, but only eight of the programs had new regulatory elements. These primarily voluntary programs have made modest emission cuts, but they have failed to come close to reaching the CCAP's overall reduction goal.

Reported "Reductions," Rising Emissions

In 2005, several senators introduced bills in Congress to encourage voluntary corporate "reductions" of global warming emissions. The Department of Energy has run a system for reporting and recognizing voluntary action since the mid-1990s under the 1992 Energy Policy Act, with the electric power industry the leading participant. However, reports from this industry illustrate the ineffectiveness of this voluntary program.

In 2003, power companies claimed to have made global warming pollution "reductions" totaling 158 million tons, even though their carbon dioxide emissions had climbed by 491 million tons since 1990. (Power companies are required to report their actual carbon dioxide emissions to the Environmental Protection Agency under the 1990 Clean Air Act.) The implication of the industry's claims is that in the absence of voluntary "reductions," electricity industry emissions would actually have grown one-third more rapidly over the last 13 years; in fact, though, emissions from the industry grew twice as fast as those from the rest of the economy.

Instead of making real investments to reduce their pollution, most power companies simply claimed credit for business-as-usual actions -- and thus made no real difference in rising emission trends.

Here are some examples:

• In 2002, 69 percent of reported "reductions" projects resulted from the standard operation of nuclear plants, with the entire output of at least three plants being reported as reductions.
• The Tennessee Valley Authority reported "reductions" totaling 25 million tons of carbon dioxide in 2003 from the Browns Ferry and Watts Bar nuclear facilities. These two units were not operational in 1990 and were subsequently brought online. The TVA calculates emissions "reductions" assuming the total output of these nuclear facilities offsets hypothetical emissions that would have been associated with their 1990 generating fleet. The TVA therefore claims reductions simply from commencing operation of these facilities. Together with a similar report from TXU's Comanche Peak nuclear plan, this accounts for roughly one-third of all claimed electricity sector reductions.
• Florida Power Light Group uses a hypothetical baseline to claim "reductions" for building natural-gas-fired generating stations. FPL Group's baseline assumes incremental capacity additions would have been coal fired, had they not built gas-fired plants. Therefore, when the company built gas-fired plants, emissions grew, but increased less than they would have with coal-fired plants. The new plants led to an emissions increase, but a reported "reduction."
• Xcel reported carbon dioxide "reductions" from retiring aged units at their Arapahoe plant. The retirement was carried out under an agreement with Colorado to reduce sulfur dioxide and nitrogen oxide emissions. Xcel calculated the baseline for carbon dioxide reductions by using the amount of carbon dioxide the retired units emitted, on average, between 1999 and 2002. Thus, the company claimed a reductions "program" by merely producing less energy.
• AES claimed an emission "reduction" for recovering carbon dioxide from its Warrior Run plant and selling it for use in food processing and soft drinks. This is actually a step backwards, though, because AES's fossil carbon dioxide is replacing renewable carbon dioxide captured from ethanol plants, the usual source of food-grade carbon dioxide. Moreover, no one at AES or the Department of Energy seems to have realized that the bubbles in soda pop are "sequestered" only until the can is opened.

Reporting emission "reductions" on a project-by-project basis is inherently fraught with difficulties -- such as determining the appropriate emissions baseline against which to measure reductions -- and is no substitute for a comprehensive, mandatory program.

Not Enough Volunteers

A few companies have made voluntary commitments to cap their own emissions. But these commitments are too few and have too many loopholes:

• BP and Shell have capped the global warming emissions from their refineries and other facilities, although these caps do not include the emissions from burning the fuels they provide.
• Several power companies -- including American Electric Power, Cinergy and Entergy -- have announced voluntary caps, but these limits are less potent than they appear because the companies are relying heavily on hard-to-verify actions, such as tree planting, to "offset" continued emissions growth from their power plants.
• The largest voluntary corporate effort to reduce emissions is the Chicago Climate Exchange, but so far, only two dozen companies have joined the initiative.

Lack of Public Funding

Many corporations are asking for government spending or tax subsidies to employ climate-friendly technologies. Some tax credits -- such as the wind energy production tax credit and proposed energy efficiency tax incentives -- are helping to bring down the costs of these technologies by more quickly reaching production economies of scale. Together with a limit on emissions, government incentives have an important role to play in technology deployment. But there simply is not enough government money by itself to change investors' decisions and reach mass deployment of all the necessary technologies.

For example, leaders in industry, government and the environmental community increasingly understand the need to replace existing coal-fired power plants with coal gasification plants that can generate both electricity and chemicals. The Bush administration has announced a $1 billion proposal to build a single coal gasification plant with carbon dioxide capture -- the so-called FutureGen Initiative. But the project is contingent upon congressional funding and the facility would not begin operation until 2015.

To stimulate more investment, the private sector must see real market signals. A cost-sharing proposal for one subsidized project is not enough to drive a commercial market for coal gasification with carbon dioxide capture. Only binding limits on global warming emissions will create the market structure needed to allow competitive businesses to go beyond cosmetic steps to reduce emissions. Until Congress takes action on this front, the private sector's response will be to take the government's money and tax breaks, but "wait and see" before making any real changes.

 

Notes

1. Carbon dioxide emissions from fossil fuel combustion account for 85 percent of U.S. emissions of heat-trapping pollution. See U.S. EPA (2005), "Draft Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2003." yosemite.epa.gov/oar/globalwarming.nsf/content/ResourceCenterPublicationsGHGEmissionsUSEmissionsInventory2005.html

2. Ibid at ES-10. Percent changes are 2003 emissions (the most recent data available) relative to 1990.

3. National Energy Strategy, First Edition, February 1991, pg.179.

4. The Climate Change Action Plan, October 1993. Page i.

5. EIA (2005), "Voluntary Reporting of Greenhouse Gases 2003," http://www.eia.doe.gov/oiaf/1605/vrrpt/pdf/0608(03).pdf

6. NRDC (2001), "Reported 'Reductions,' Rising Emissions: The Failure of Voluntary Commitments and Reporting to Reduce U.S. Electric Industry CARBON DIOXIDE Emissions," www.nrdc.org/globalWarming/reductions/execsum.asp.

last revised 8/23/2005